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FDI Gold Rush headed to India!

AT Kearney, global management consultants, have ranked India as the second-most favoured destination for foreign direct investment (FDI) in the world, after China. (Source: Economic Times)

Business potential is huge in India; keeping in mind the backlog of FDI proposals lined up for approval with the government, across various sectors/ industries – core sector i.e., particularly the manufacturing, exploration of natural resources, revving up the retail markets, capitalising on educational requirements, start-ups related to software/ technology businesses & related venture capital opportunities, technology enablers in communication/ broadband – to name a few. But, I do not understand why we are the ‘second’ most favoured destination?

China, despite being communist, is preferred more than India is. I do agree the size of China’s GDP ($ 4.99 trillion in 2009) is much larger than India has (Indian GDP $ 1.25 trillion). But, if you take in to account, the ‘Black Money’ (at approx $ 500 billion), at 40% of the GDP – Indian economy/ GDP is larger! China has maintained a consistent 10% growth rate over the last 30 years when compared to the growth rate recently we achieve at 8.80% in India. This makes China the second largest economy in the world!

Political ‘populist’ moves that solely cater to the vote banks and the democratic set up that facilitate freedom of action – have delayed the progress of FDI being made in India! The question rises, “Whether India can absorb the FDI inflows coming to it?” It can happen, only if the economic reforms started by the government are implemented on time. The legal bodies should expedite and give clearances as early as possible. Delay in the implementation of FDI projects not only result in losses; but, also discourage future investments. Politico-administrative structure slackens the speed of momentum gained in FDI, due to its inherent flaws that are not corrected.

Land acquisition for the project is a ‘people’ problem in India – a fact that is not fully accepted by the government and remedial measures have not been taken. In such unprepared situations, the political parties try to gain the mileage out of such hiccups and stall the progress further. This calls for transparency while framing policies and resultant accountability or assurance by the government prior to the start of projects! Given the large infrastructure deficit in India, we need to be focused, to ensure the reforms are getting implemented as projected. Prime time in the Indian Parliament should not be wasted on non-issues.

It is really noteworthy that China and India are the two most favored nations for FDI inflows originating from the developed world that is in recession. This ‘growth’ opportunity should be utilized to the maximum. It is only China and India, who will enable the world to recover from recession!